Cheryl Craven-Ansin (“Cheryl”) and Kenneth Ansin (“Kenneth”) had been married for 19 years with two children when they executed an agreement which set forth what would happen to their marital property should they divorce. In the months prior to the execution of the agreement, the Ansin marriage had been faltering. Cheryl later testified that when Kenneth first broached the idea of a postmarital agreement in 2003, she became physically ill and they soon separated. Kenneth and Cheryl continued to communicate and Kenneth promised that he would recommit to the marriage if Cheryl signed the agreement. The agreement was signed in 2004 after negotiations between the parties’ respective counsel and the parties reconciled. The agreement provided that in the event of a divorce, Cheryl would receive a fixed sum of money from the parties combined 19 million dollar estate and 30% of the increase in the value of Kenneth’s assets from the time of the agreement, but no loss to Cheryl should the assets lose value. By 2006, the parties had separated and Kenneth filed for divorce. Kenneth sought to enforce the terms of the marital agreement and Cheryl wanted the agreement thrown out. The judge in the Probate Court approved the agreement. Cheryl appealed.
Prior to the recent decision on July 16, 2010 by the Massachusetts Supreme Judicial Court (the “SJC”) in the matter of Kenneth S. Ansin vs. Cheryl A. Craven-Ansin, the status of “postnuptial” or “marital” agreements in Massachusetts was uncertain. Massachusetts has long recognized (since 1981) the rights of parties to enter into premarital or antenuptial agreements before they married and to enter into separation agreements (since 1976) when they are approaching divorce. Prior to Ansin however, the issue of postnuptial or marital agreements which altered marital rights or distributed marital assets during the marriage between parties not contemplating divorce had not been brought forward to the court for determination. The use of postnuptial/marital agreements has been determined in other states with mixed results. Courts in Florida, Arizona, Wisconsin, and Tennessee for example, have allowed such agreements under certain circumstances while Ohio, by statute, specifically prohibits them no matter when or where signed.
The SJC referred to the American Law Institute, Principles of the Law of Family Dissolution (“ALI”) in several areas of its decision, including in its definition of postnuptial/marital agreements as an “agreement between spouses who plan to continue their marriage that alters or confirms the legal rights and obligations that would otherwise arise under…[the] law governing marital dissolution.”
The SJC has now established criteria for the enforcement of what will be known as “marital” agreements and which differs from the criteria for enforcement of prenuptial agreements or separation agreements. The SJC’s rationale for the difference in criteria rests on the leverage that a party has during the negotiation of the agreement. In the case of prenuptial agreements, if a party is not in agreement with the terms that have been proposed, then the party is free not to marry. When negotiating separation agreements, the parties have acknowledged that their marriage has failed and each is negotiating for their own independent interests and if they cannot agree, they are free to proceed to a determination of their rights by the courts. Once parties are already married the scrutiny applied to the terms of a marital agreement should be more strenuous. The SCJ recognizes that marital agreements may provide opportunities for one party to threaten divorce (thereby pressuring the other that without agreement there will be an eminent end to the family relationship, negative impact on the children, etc.) in order to obtain a financial advantage from the other spouse.
There are specific criteria set forth in the Ansin case that provide guidance as to factors by which future cases will be determined. (1) Each party must have had an opportunity to obtain separate legal counsel of his/her own choosing. It is not required that each party be represented by separate counsel, but if this has not occurred, then it may be more difficult to prove that the party made an informed and independent decision to execute the agreement.
(2) The agreement must have been signed freely and voluntarily without any fraud or coercion. The SCJ has established that the spouse who seeks to enforce a marital agreement is the one who must prove that the other spouse’s consent was not obtained through coercion or fraud. In the Ansin case, Cheryl argued that Kenneth had committed fraud by misrepresenting his intention to remain in the marriage in his effort to convince her to execute the marital agreement. Kenneth presented evidence that he had made significant efforts to improve the marriage, that they had purchased and renovated at great expense a new home after the signing of the agreement and that he did not file for divorce until Cheryl had asked him to leave the home and was involved with another man. It should be expected that in any review of a marital agreement, a court will closely examine whether or not a spouse has been misled regarding the other party’s commitment to the marriage. (3) Similar to the standards of a prenuptial agreement, any marital agreement must contain a full disclosure of all assets with their approximate market value, a statement of each party’s approximate annual income and equally as important, disclosure of any significant future acquisitions or changes in income which are reasonably anticipated. (4) A marital agreement must also contain a clear and explicit waiver of the right to a judicial determination of marital rights and asset distribution in the event that a divorce does take place at some point in the future. The SJC set forth detail for the evaluation of whether or not there has been a valid waiver. The criteria for a valid waiver include whether or not a party has been represented by independent counsel, whether they had sufficient time to review the terms of the agreement, whether they understood the terms of the agreement and their impact and whether or not they understood what their rights would have been absent the agreement. (5) Also similar to the review of prenuptial agreements, martial agreements must be evaluated to determine if the terms were fair and reasonable at the time of the execution of the agreement and are still fair and reasonable at the time of the divorce. The standard for evaluation differs from that of a prenuptial agreement because of the context in which the martial agreement takes place. There will be heightened scrutiny in the evaluation of marital agreements. Case law in Massachusetts has already described the contractual obligations between spouses in the matter of Krapf vs. Krapf in 2003 by stating that spouses “stand as fiduciaries to each other and will be held to the highest standards of good faith and fair dealing in the performance of their contractual obligations.”
When reviewing whether or not the marital agreement was fair and reasonable at the time of its execution, there are standards a judge “should” consider and standards which a judge “may” consider. The SJC has stated that a judge should consider the entire context in which the agreement arose, including a consideration of whether or not each party was represented by independent counsel. While the failure of independent representation will not be fatal to an agreement, it is likely to impact the scrutiny which is applied. In the Ansin matter, the SJC found that Cheryl had been represented by experienced and independent counsel who had successfully negotiated additional favorable terms for her. Cheryl’s attorney testified that she intended to negotiate a legal and binding contract for Cheryl. A judge may consider: (1) the difference in the outcome under the marital agreement from the outcome under current law; (2) whether the purpose was to benefit the interests of third parties such as children from a prior relationship; (3) the impact of the agreement on the children of the parties; (4) the length of the marriage; (5) the motives of the parties; (6) the bargaining positions of the parties; (7) the circumstances which gave rise to the agreement; (8) the degree of pressure experienced by the spouse who is contesting enforcement of the marital agreement; and (9) other circumstances that the judge may want to consider.
When reviewing whether or not the marital agreement is fair and reasonable at the time of a divorce, the SJC requires that the same criteria be used that is used to evaluate a separation agreement. In citing the matter of Dominick v. Dominick, the SCJ enumerated the factors a judge may consider as follows: “(1) the nature and substance of the objecting party’s complaint; (2) the financial and property provisions of the agreement as a whole; (3) the context in which the negotiations took place; (4) the complexity of the issues involved; (5) the background and knowledge of the parties; (6) the experience and ability of counsel; (7) the need for and availability of experts to assist the parties and counsel; and (8) the mandatory and, if the judge deems it appropriate, the discretionary factors set forth in G. L. c. 208 § 34.” The SJC further elaborated by explaining that a judge need not determine what decision they would have made had the divorce case actually been litigated, but whether the marital agreement is “fair and reasonable” when considered in the totality of circumstances.
The Ansin case has provided significant detail and guidance for insuring that marital agreements are adequately drafted and that sufficient safeguards are enforced so that each spouse’s rights are protected. Marital agreements will likely find a variety of uses in the context of estate planning, as a method to protect third parties such as children from a prior marriage or to strengthen a relationship by providing assurances of asset distribution should there be a divorce in the future. In any contemplation of the use of marital agreements, it is clear that great care must be taken so that the intentions of the parties will not be undermined by the failure to follow the clear criteria that has been established.
This article is a general summary only and does not constitute legal advice.
Carla W. Newton is a partner at Robinson Donovan, P.C. For questions about marital agreements or any other Family Law matters, contact Carla at (413) 732-2301.
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